Indicating

continued, solid momentum in the nation's housing market, builders began

work on new homes and apartments at a seasonally adjusted annual rate

of 1.85 million units in January, according to Commerce Department figures

released Feb. 19. This marks the fastest pace of housing construction

in 16 years, including the best single-family production in 24 years.

Low interest

rates and healthy house-price performance remain the most important factors

behind the obvious strength that single-family housing has maintained

amidst generally weak consumer confidence measures.

The National

Association of Home Builders' Housing Market Index was down two points

to a still-healthy 62 reading in February. Derived from a monthly survey

of builders that has been conducted for almost 20 years, the HMI has remained

within the same relatively high three-point range since September of 2002.

Home builders are asked to rate current sales of single-family homes and

sales expectations for the next six months as "good," "fair"

or "poor." They are also asked to rate traffic of prospective

buyers as either "high to very high," "average" or

"low to very low." Scores for responses to each component are

used to calculate a seasonally adjusted index where any number over 50

indicates that more builders view sales conditions as good than poor.

The HMI's component

gauging current sales conditions for new single-family homes registered

no change in February from its solid 69 reading in the previous month,

while the component gauging builders' expectations of sales in the next

six months registered a marginal two-point decline to 66. However, the

component gauging traffic of prospective buyers fell eight points to 43

in February, possibly due to worse than usual weather conditions.

These figures

indicate it would be tough to maintain the super-strong building pace

recorded for the past several months. But the market fundamentals remain

solid, and the current level of builder optimism regarding the single-family

segment reflects that.

New single-family

homes were constructed at a seasonally adjusted annual rate of 1.51 million

units in January. This was up 2.1 percent from December's strong number

and the fastest production pace since November of 1978. It also is just

shy of the fastest construction pace on record 1.53 million single-family

units started in December of 1977. Multifamily housing starts declined

7.6 percent to a 340,000-unit rate in January following a big jump in

December.

Regionally,

housing starts were mixed in January. The South, which is the largest

regional housing market, posted a 3.8 percent gain while the West had

a nearly 10-point increase. The Northeast and Midwest posted double-digit

declines of 16.7 percent and 12 percent, respectively.

Following a

major up tick in the previous month, housing permits a potential indicator

of future building activity declined 5.6 percent to a rate of 1.78 million

units in January due entirely to a 23 percent drop on the multifamily

side to a rate of 366,000 units. Single-family permits were virtually

unchanged at a rate of 1.42 million units.

Regionally,

permits rose 3.3 percent in the West in January, but fell 7.2 percent

in the South, 8.4 percent in the Midwest and nearly 15 percent in the

Northeast. Keep in mind that there were significant backlogs of unused

permits being held by both multifamily and single-family builders in January.

These could translate to additional starts activity in coming months.

The bottom

line is that housing is holding up very well as we head into the spring

home-buying season. NAHB is projecting another solid year for our industry

in 2003, with a gradual leveling off of production activity as the year

progresses. NAHB's current forecast calls for 1.65 million housing starts

this year, down 3.5 percent from 2002's exceptionally strong 1.71 million

units.

(Chad Floyd,

who is with Chadwick Homes, is president of the Home Builders Association

of Midwest Georgia, which serves a membership of approximately 550 builders

and associate members in Fayette, Coweta, Spalding, Heard, Meriwether,

Pike, Upson and Lamar counties.)

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